The Yin and Yang of Financial Markets

It´s hard to strive for superior investment returns – many say it´s futile, because markets are too efficient. While researching for ways to gain an edge and to exploit systematic inefficiencies in the market, I come across the same pair of principle forces in different forms again and again. Mean Reversion and Momentum These pervasive…

Bear Market Preparation

It sure feels good when the value of your portfolio is rising on an almost daily basis. But, when virtually all assets are going up, that achievement isn´t exactly magic. A rising tide lifts all boats, as the saying goes and it will pay off in the long run to keep in mind how we…

Are Cryptocurrencies on a similar path as the Internet in 1999?

Opinions on bitcoin and cryptocurrencies usually are very binary: cryptocurrencies are about to take over the world and the sky is the limit for valuations (sometimes with a caveat about nonsensical ICOs) cryptocurrencies are a fad and what we are seeing is the greatest bubble since internet stocks in the late 1990s Often smarter commentators…

Working with different Market Regimes Part II

Based on a refined, trustworthy investment philosophy, I return to the practical implementation of our key question: How is successfully adapting an asset allocation to market conditions possible and can it yield higher risk- adjusted returns than a static portfolio?   I concentrate on the third basic building block of my investment philosophy – systematic downside protection through dynamic…

The Mythical Road to Financial Independence

Financial independence is an enticing concept, that spawned a popular movement with its own jungle of lifestyle possibilities, methods and acronyms. It is based on the perception that the traditional working life as an employee, often characterized by consumerism, ending with retirement at 65 (or thereabouts) is very suboptimal for many people. It also implies that happiness comes…

Is Trend Following a figment of the imagination?

Absolute momentum or time series momentum, as trends are called in academia, can be used to time virtually any price series (like asset prices, composite indices, equity curves, factors and so on) in such a simple manner, that to be able to gain an advantage over the market that way, seems a bit suspect. Not to mention,…

Volatility Strategies in Detail

Let´s put some meat on the bone and dig deeper into the details of the volatility strategies I use in my portfolio. These are the most active, short term strategies I use at the moment. They also use concepts that are more off the beaten path, which makes them more valuable, but also more difficult…

Common Sense Backtesting

When looking at new strategies, I try to judge the quality of an idea by looking at it from different angles. A combination of methods estimates a range of possible outcomes that strategy could have and defines its place in the portfolio – one could call it common sense backtesting.   Ideas first I always…